IMF takes $1 billion from Africa (fwd)

[Robert Weissman <rob@essential.org>]

>From Jubilee 2000 UK comes this important and disturbing update:

http://www.jubilee2000uk.org/news/imf0904.html

IMF takes $1 billion in two years
    from Africa as official report
    reveals five new reasons to Drop
    the Debt 

     The growing scale and depth of the debt crisis in the world's poorest
     countries is revealed in the official annual report on global debt,
     published today by the World Bank. 

     The figures and analysis in Global Development Finance 1999 show
     five key new developments, making debt cancellation more urgent than
     ever: 

     1. The IMF extracted a net $1 billion from Africa in 1997 and 1998,
     reversing the trend of the last five years. At the same time, it spent
     billions bailing out bankers in East Asian crisis economies 

     2. Developing countries paid back $13 for every $1 they received in
     grants in 1998, up from $9 in 1996 

     3. Commodity prices have plunged, crippling the poorest countries'
     ability to repay foreign debts 

     4. Grants to developing countries went down from $35 billion in 1991
     to $23 billion in 1998 - including a $2.8 billion (11 per cent) fall
in the
     last year 

     5. Despite borrowing less than they paid back in 1998, total debt in
     developing countries rose again - by $150 billion to a new total of
     almost $2.5 trillion. 

     IMF takes $1 billion out of Africa in two years 

     The tables buried in Global Development Finance show how the
     IMF's relationship with sub-Saharan Africa has changed dramatically in
     the last few years - with serious consequences. Between 1993 and
     1995, there was a net transfer of funds from the IMF to Africa, as new
     resources outstripped repayments. In 1997 and 1998, this trend has
     been thrown dramatically into reverse, with a net transfer from Africa to
     the IMF adding up to more than $1 billion ($643 million in 1997 and
     $390 million in 1998). 

      



      

     The switch in the flow of resources between the IMF and Africa
     coincides with the beginning of the series of bailouts for East Asian
     economies arranged and partly funded by the IMF. 

     Despite the huge repayments to the IMF by African countries, total
     African debt has continued to rise (see below). 

     Developing countries paid back $13 for every $1 they received
     in grants in 1998 

     The report shows that developing countries continue to pay far more to
     creditors in debt payments than they receive from them in grants - and
     the gap is increasing. As grants fell and debt service increased,
     developing countries paid nearly $13 in debt repayments for every $1
     they received in grants in 1998 - up from $9 in 1996 and $12 in 1997. 

     Even in Africa alone, where this ratio has always been much smaller,
     the gap between grants and debt payments is increasing. In 1998,
     sub-Saharan Africa paid $1.41 to creditors for every $1 received in
     grants - up from $1.36 in 1997 and $1.38 in 1996. 

     Commodity prices have plunged 

     The World Bank confirms that commodity prices have fallen heavily,
     affecting the poorest countries' ability to earn the foreign currency need
     to repay debts. 

     Commodity prices overall lost 16 per cent of their value in 1998,
     continuing a longer-term trend. Metals and minerals prices ended the
     year 33 per cent down from their peak in August 1995, while food
     prices fell 21 per cent from their level in April 1996. No recovery is
     expected before 2000, and then is expected only to be slow. 

     This fall in commodity prices is attributed to two factors. First, the
crisis
     in East Asia has reduced world demand and forced crisis-hit countries
     to look to their own supply sources rather than importing from
     elsewhere. A more significant factor, though, is the long-term
     suppression of commodity prices. The report says that the greatest
     impact in reducing commodity prices has come from increased supply
     caused in particular by improved technology, better economic policies,
     and increased privatisation of production. Ironically these
     developments, which are so damaging to many heavily-indebted
     countries, are all specifically encouraged by World Bank and
     IMF-sponsored structural adjustment programmes. 

     World trade and economic prospects in the wake of the East Asian
     crisis are also bleak for heavily-indebted poor countries. The report
     says that the crisis in emerging markets is likely to be deeper and more
     prolonged than earlier assessments had suggested with the growth
     forecast for developing countries revised downward to 1.5 per cent in
     1999 - the lowest since 1982. 

     Grants to developing countries went down from $35 billion in
     1991 to $23 billion in 1998 

     Grants to developing countries have continued their historic fall, with a
     one-year drop of 11 per cent to $23 billion in 1998. This obviously
     further limits the funds available for spending on crucial needs in
health,
     education and sanitation, and the effect of funds being diverted towards
     debt repayments is all the more severe. 

     Despite borrowing less than they paid back in 1998, total debt in
     developing countries rose again 

     The report shows that the classic debt trap is still ensnaring many poor
     countries in Africa and Latin America. During 1998, developing
     countries succeeded in paying back more in debt repayments than they
     took on in new loans. These negative net transfers on debt amounted
     to $16 billion. Despite this, total debts increased, from $2.32
trillion in
     1997 to $2.47 trillion in 1998. 

     This effect was felt in the key regions of sub-Saharan Africa and Latin
     America too. Latin American debts increased by 5 per cent to $736
     billion, despite the region paying back $20 billion more than it
     borrowed in 1998. Similarly, Africa's debts increased by 3 per cent to
     $226 billion, despite African countries paying back $3.5 billion more
     than they borrowed. 

     Jubilee 2000 comment 

     This report comes hard on the heels of a series of proposals from
     the British, American, French, German and Canadian
     governments, all claiming to tackle the problem of unpayable debt
     comprehensively. It comes as the World Bank concludes the first
     part of its review of the Heavily Indebted Poor Countries' (HIPC)
     initiative. The message to all these creditors is clear; the recent
     flurry of thinking on debt may be welcome, but it does not go
     nearly far enough. 

     The report presents new information about the scale of the debt
     crisis. Aid is falling. Commodity prices have plunged. The IMF has
     extracted a billion dollars in two years from Africa. Total debt
     continues to rise, despite ever-increasing payments. And the
     developing world now spends $13 on debt repayment for every $1
     it receives in grants. 

     Gordon Brown and his G8 colleagues will have to go back to the
     drawing board and recognise that what is needed now is not just a
     little more debt cancelled, or a few more countries included, or a
     slightly faster timetable adopted. They should accept the need for
     a major step, to set behind us once and for all the burden of
     unpayable debt as we enter the new millennium. 

     This report should set alarm bells ringing in Washington, London,
     Bonn and Tokyo. If finance ministers and officials respond to this
     emergency call by radically upgrading their ambitions for a deal
     on debt at the Cologne G8 summit in June, this report will have
     served an important purpose. 

     The scale of the challenge is clear. Are the G8 leaders up to it?